Good business is good for business, if it makes good business sense

Arian Simone, co-founder of Fearless Fund, has a unique story of becoming an investor. She explained at HSBC’s SME virtual event, HSBC Drive¹, why her fund invests in businesses run by women of colour and why startups need to link their sustainability to their overall objectives.

• Black female startup founders received just 0.34% of the total venture capital spend in the first half of 2021².
• Startups and small companies need investors that share their vision, but sustainability won’t make investors forget due diligence or returns.
• Founders need to ask themselves what kind of impact they want to make and then identify where that fits into the business.

When Arian Simone was looking for funding for her first business, a mall-based retail store, she managed to raise around $200,000. But what struck her at that time, about 20 years ago, was that not many of the investors she met were people of colour and still fewer were women of colour.

“I made a promise to myself, sitting amongst all the clothes before the grand opening, that I shouldn’t worry about the investor landscape because one day I would be the best investor that I was looking for,” she said.

After a move to LA, a stint of homelessness and building a PR and marketing firm from the ground up that eventually serviced clients like Sony Pictures and Walt Disney, she has kept that promise. Fearless Fund invests in women of colour led businesses seeking pre-seed, seed level or series A financing and its mission is to bridge the gap in venture capital funding for women of colour founders building scalable, growth-aggressive companies.

The funding gap for people of colour

When Arian started to build Fearless Fund, it wasn’t easy, because people did not believe that a fund built by women of colour for women of colour made sense. But that was both offensive and inaccurate, because women of colour are the most founded entrepreneur demographic – and also the least funded.

According to Crunchbase data, Black female startup founders received just 0.34% of the total venture capital spend in the first half of 2021, and that was a five-year high³. Funding to US companies led by Black founders reached $1.8 billion in the first half of 2021. That half-year total already eclipses the total funding to Black founders for all of 2018, which was previously the highest year.

The tide is turning, but it’s slow going.

“Knowing that there are so many people out there deserving of the funds is the reason why we get up and pound the pavement every single day,” says Simone. “The inspirational stories of other entrepreneurs, and seeing their journeys, that motivates me, seeing other people break glass ceilings, that motivates me, and my desire to be the business investor that I was looking for is the biggest motivating factor.”

The link to sustainability

Part of the change may lie in the strong links between businesses led by women of colour and sustainability.

“When you invest in women of colour, they invest the money back into their communities and their families. So by default, what we do has so much impact, the audience we're serving is always so socially conscious, even in how they operate their businesses. The domino effect just blows me away,” said Simone.

When she and her partners were building the Fearless Fund, it quickly became apparent that the type of investors they needed to get meetings with were those that had a strong commitment to diversity and inclusion (D&I). D&I is an increasingly important pillar of ESG for all companies, but they wanted to address those that were very active, looking at D&I across their board, C-suite, suppliers and employees. As Simone puts it, they needed investors that shared their vision.

But that commitment didn’t come at the cost of due diligence.

“There's no concessions, business is still business. And if anything, when you're an emerging fund manager, there’s probably more intense scrutiny. We were building something that had yet to exist until we built it. So there was a lot of scrutiny on the front end, a lot of diligence,” says Simone.

And it didn’t come at the cost of returns either.

“Our portfolio, I am proud to say, has had a stellar performance – to the point where I knock on wood! Our top investors are beyond pleased, they knew this was going to work out well, but to see it work out well on paper is another story,” Simone adds.

Good business sense

For new businesses, according to Simone, the founder needs to ask themselves what kind of impact they want to make, but they also have to identify where that fits into the business.

“Some people are doing it day-by-day by creating more jobs, some people are doing it by educating more people to do exactly what it is they do,” says Simone. It depends on the impact you're looking to drive, and how it links with your business.

“There's a lot of social impact investors out there now, but at the end, it's still going to be business, and you're still going to have to issue your returns. If you're able to show your ability to do that, while still doing good, you’ll be fine.”

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